It’s a few feet away from the widow, at window height, and pointed out toward the window, perhaps sitting on a stool or table. This creates a current that forces more air out (the damp, musty, stinky, or hot air you’re trying to dispose of). The air will be replaced by new air, either from the rest of the house or from another nearby open window.
There might be reasons not to do things the “optimal” way, though. Powerful fans might blow over and placing them directly in the window allows you to pin it in place with the weight of the window at a cost of a little efficiency. A fallen fan is doing nothing for you, after all.
Putting it directly in the window can help keep out pests, too. You’re not going to be happy to have eliminated the bad air only to have replaced it with a invasion of gnats.
Finally, the reason for venting matters. If you’re, say, trying to fill the room with cold night air, you might want to put fans in windows to pull in the air while vent windows are open to let the hot air out. Doing it the other way could pull more hot air into the room from the rest of the house at the same rate it’s pulling in cool air, which won’t cool the room very efficiently.
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